Corn Crop Breakevens for the 2012

So what's your breakeven for the corn crop that you're planning to put in the ground in a couple months? We've been asking that question at a series of meetings we've held with farmers in January and December. It's a number that's good to know - moving forward - in order to achieve profitability from the tools available in the market. Here's the feedback we heard from farmers:

When we work these metrics at Water Street, we use a long term breakeven, so it typically looks higher than what you might expect. It includes not only the price of inputs, fuel and labor but also the cost of capital, depreciation and family living expense. After all, if your income for the year is coming from this crop then the crop has to cover those expenses as well.

Across our client base corn breakevens for analyses done to date are $5.17 for the coming year. And if you take that number, or those above, and look at the current price of corn it appears that this year could be a little more challenging with a little less margin. It could be a year when profit doesn't come as easily. You will need to pay close attention, knowing how to use the tools available. 

Have you maximized your use of crop insurance for the coming year? Most of the time the payouts in crop insurance aren't a result of actual damage to the crop, rather the payout is made due to price erosion. Today's crop insurance products protect revenue, which is derived from yield and price. 

Here's another question we posed:  On average, what percentage of your crop do you forward contract ahead of harvest?

We also wanted to know from farmers - when you are sold ahead of harvest, do you re-own the grain if the scenario changes? This option is a chance to adjust if the situation changes, going back and reversing previous decisions. Not many farmers take advantage of this. Over 47% said they NEVER re-own the grain once sold even if the price scenario changes. Less than ½ of one percent said they always do. About 45% said "it depends". So look at your numbers and predict whether 2012 will be a good financial year for you. From the numbers above, I would say:  "It depends."